July 9 (Bloomberg) -- German government bonds advanced,
with 10-year yields falling for a second day, as the
International Monetary Fund’s decision to reduce its global
growth forecast boosted demand for safer assets.

Bunds also rose as European Central Bank Executive Board
member Joerg Asmussen said on Reuters Insider TV the ECB’s
pledge to keep rates low or even lower goes beyond 12 months.
Spain’s 10-year securities declined. Portuguese bonds gained
after the European Union agreed to release additional aid to
Greece, easing concern that the debt crisis will worsen. Greek
10-year yields fell earlier to the lowest level since June 20.

“The IMF forecasts still show global growth is still
pretty fragile and Europe in particular is struggling,” said
Nick Stamenkovic, a fixed-income strategist at RIA Capital
Markets Ltd. in Edinburgh. “That’s clearly providing some
support for bunds. The ECB looks to be providing more detail on
its forward guidance, though it doesn’t look like they are going
to attach thresholds to that.”

The benchmark 10-year bund yield fell four basis points, or
0.04 percentage point, to 1.65 percent at 5 p.m. London time.
The rate dropped to 1.60 percent on July 4, the lowest since
June 20. The 1.5 percent security due in May 2023 climbed 0.395,
or 3.95 euros per 1,000-euro ($1,277) face amount, to 98.615.

Global growth will be 3.1 percent this year, unchanged from
the 2012 rate, and less than the 3.3 percent forecast in April,
the Washington-based IMF said, citing a weaker U.S. expansion, a
leveling off in China’s economy and Europe’s recession.

‘Growth Slowdown’

“Downside risks to global growth prospects still
dominate,” the IMF said in an update to its World Economic
Outlook. It cited “the possibility of a longer growth slowdown
in emerging market economies, especially given risks of lower
potential growth, slowing credit, and possibly tighter financial
conditions.”

Asmussen said the ECB also hasn’t ruled out another round
of Longer Term Refinancing Operations to inject cash into the
banking system.

European finance ministers said yesterday Greece will get
2.5 billion euros this month and 500 million euros in October if
the government delivers on economic reforms and cuts to
spending. Greece can also count on recouping 2 billion euros in
central bank profits on Greek bonds and on 1.8 billion euros
from the IMF.

“There was rather good news from Greece, now we have that
uncertainty in terms of financing most likely off the table,”
said Christian Lenk, a fixed-income analyst at DZ Bank AG in
Frankfurt. “Investors are simply looking again at where can we
get some yield pickup.”

Portugal, Ireland

Greece’s 10-year rate increased six basis points to 10.99
percent after falling as much as 62 basis points.

Spain’s bonds fell after the country sold 3.5 billion euros
of 2028 bonds via banks. The 15-year securities were sold at a
price of 99.57, equivalent to a yield of 5.194 percent,
according to a person familiar with the deal who asked not to be
named. The rate on Spanish 10-year bonds was six basis points
higher at 4.74 percent.

The Netherlands auctioned 2.3 billion euros of bonds due in
July 2023 at an average yield of 2.061 percent. It last sold 10-year debt on May 28 at 1.783 percent, compared with a record-low
auction rate of 1.579 percent set on Nov. 13.

“Positive cash flows and the relative cheapness of the
Dutch paper both versus Germany and France are likely to have
been the key supportive factors,” Annalisa Piazza, a fixed-income analyst at Newedge Group in London, wrote in an e-mailed
note to clients.

Bond Movers

Volatility on Finnish bonds was the highest in euro-area
markets today followed by those of Germany and Portugal,
according to measures of 10-year debt, the yield spread between
two- and 10-year securities, and credit-default swaps.

German bonds handed investors a loss of 1.4 percent this
year through yesterday, according to Bloomberg World Bond
Indexes. Greek securities returned 16 percent and Portuguese
bonds gained 0.1 percent, the indexes show.